EMC Antes Up $2.25B For Isilon

EMC has ended months of speculation with the announcement it will shell out approximately $2.25 billion for Isilon Systems, Inc., a fast-growing 'scale-out NAS' (network attached storage) vendor based in Seattle, Washington. Growing at more than 70 percent year-over-year, Isilon has 1,500 customers and 2010 revenues are forecast to reach $200 million. Combined revenue from Isilon and Atmos, EMC's cloud infrastructure offering, is expected to reach a $1 billion run-rate during second half of 2012, tripling from current combined levels, states EMC.

According to Wikibon's Dave Vallente, the Isilon acquisition is a good deal because it is an excellent product, EMC's NAS products are nearing the end of the line and Isilon is the future of scale out where the growth is huge. 'Once again EMC is using all its weapons to compete with the smaller NetApp. NetApp is growing faster, gaining more share (in overall storage), has great momentum in the market and yet EMC just keeps changing the game in an effort to stay ahead of NetApp. VMware, VCE, Data Domain and now Isilon - EMC is pulling out all stops to compete.'

For the second quarter, IDC reported (Worldwide Quarterly Disk Storage Systems Tracker) that the NAS market grew 51.1 percent year over year, with EMC holding down top spot (45.6 percent), followed by NetApp with 25.2 percent. Using IDC data, EMC says the 'scale-out NAS' will grow on average approximately 36 percent annually reaching an estimated $6 billion dollars in 2014.

Together, Atmos and Isilon solutions will offer customers a highly scalable, low-cost storage infrastructure for managing 'Big Data', the term used to describe the massive amount of data produced by a new generation of applications in markets such as life sciences (e.g. gene sequencing), media and entertainment (e.g. online streaming), and oil and gas (e.g. seismic interpretation).

Greg Richardson, an analyst with Technology Business Research, Inc., says big data will create big opportunities in cloud and vertical solutions and the Isilon acquisition will strengthen EMC's in this segment. "We believe this will open new doors to expansion in high-growth vertical markets, and better position EMC against competitors that maintain large, vertical-centric solutions businesses, such as IBM, Fujitsu, and, increasingly, Dell.Additionally, Isilon's ability to scale up and down enables the company to continuously align storage capabilities with changing demand, making the solution a strong component of the cloud. As a result, EMC will add another arrow in its quiver to drive the adoption of public and private cloud infrastructures."

The acquisition activity in the storage market has been fast and furious, says Richardson. Add Isilon to the growing list of deals -- HP's acquisition of 3Par, Dell obtaining Exanet, and NetApp's purchase of Bycast - and competitors are stepping in for both offensive and defensive purposes, aiming to concurrently expand their portfolios while simultaneously driving up the acquisition price and chipping away at competitors' cash balance for future acquisitions, he says.

"EMC is no stranger to bidding wars, as the company emerged the winner from a heated battle with NetApp for deduplication vendor Data Domain in 2009. Since the acquisition, Data Domain has consistently grown at a double- and triple-digit rate, helping EMC's Backup and Recovery Solutions business reach a $1 billion annual revenue run rate," Richardson says.